Disney, Fox deal near

A deal to sell the entertainment assets of 21st Century Fox to The Walt Disney Company is coming close to fruition, according to CNBC.com. But now there is a new twist: Fox’s regional sports networks may become part of the Disney family.

Initially, Fox reportedly proposed to keep Fox News, Fox Broadcasting, Fox O&Os, and sports networks FS1 and FS2 and the regional sports networks (RSNs). Now the RSNs could be sold to Disney as well.

This comes as Disney and Fox have resumed talks in the last few weeks, and it appears a deal could be announced as soon as next week. According to the CNBC report, Fox shareholders would get one share of the company after the studio assets plus Disney shares in a fixed exchange ratio.

But the big surprise is the possible sale of Fox’s regional sports networks, who hold the broadcast rights to several MLB, NBA, NHL, MLS, and WNBA teams, plus numerous collegiate sports. A sale to Disney could result in the re-branding of the Fox Sports nets to ESPN.

For example, Fox Sports Wisconsin – rightsholders to the Milwaukee Brewers and Milwaukee Bucks, could be renamed ESPN Wisconsin. A re-brand connecting the RSNs with “The Worldwide Leader In Sports” could bring in more value.

ESPN is looking for product to launch its new over-the-top network, and regional sports rights could come in handy, perhaps to sell locally in those areas where those channels are available. In addition to Green Bay and Milwaukee, markets where Fox operates RSNs include New York (though a partnership with Yes), Los Angeles (Fox Sports West, Prime Ticket), Detroit (Fox Sports Detroit), St. Louis/Indianapolis (Fox Sports Midwest), and Dallas-Ft. Worth (Fox Sports Southwest.)

Sources say Rupert Murdoch isn’t too keen on RSNs these days as rights fees are rising faster than the revenue rates are. Also, the increasing number of viewers cord-cutting are having an impact. While RSNs have drawn strong viewership thanks in part to the popularity of hometown teams, they’ve also had their struggles. Recently, NBC Sports Chicago (formerly Comcast SportsNet Chicago and CSN Chicago) went through another round of layoffs. NBC Sports Chicago canceled its nightly sports wrap-up show in favor of In The Loop, a more laid-back effort launching exactly one year ago today. Meanwhile, ESPN has its own problems, recently laying off 150 people in a second round of layoffs.

Fox also lost rights to several high-profile teams in recent years, notably the Los Angeles Lakers and Dodgers to TimeWarner Cable (now Spectrum) to start their own individual sports networks.

Before Fox Sports 1 launched, Fox tried to complete with ESPN by buying a stake in Liberty Media’s RSNs in 1996, and rebranding them (as Fox Sports Detroit, etc.) Several efforts (hiring Keith Olbermann, the National Sports Report, etc.) to create a national footprint were not successful. In the late 1990s and early 2000s, several RSNs owned by Cablevision were licensing the Fox Sports Net name, converting them from SportsChannel (including Fox Sports Net Chicago.) This too proved unsuccessful, with all four Chicago teams pulling out of the network to join Comcast to form Comcast SportsNet in 2004.

As for the non-sports part of this scenario, Disney’s acquisition would give them control of the 20th Century Fox film studio; current television series such as The Simpsons, This Is Us, and Bob’s Burgers; rights to all of the Star Wars films; and more. Disney would also gain a controlling stake of Hulu, even as it is planning to launch its own over-the-top service to compete with Netflix.

All together, the deal could be worth about $60 billion. Other suitors such as Comcast, Sony, and Verizon don’t seem to be nearly as interested as they were before due to the escalating price and anti-trust concerns. But as we know in this business, anything can happen. Stay tuned.